In large, complex IT organizations, there is a need for effective management of financial resources to support the organization’s IT initiatives. One crucial question in this management is whether there is an IT finance function embedded within the IT organization or whether it is centralized under the corporate Finance department. IDC sees the question, not infrequently, from IT organizations where Finance is arguing for assuming these staff in the interest of efficiency.
Based on IDC experience with large, complex, client IT organizations, we have observed that a majority of these organizations have embedded financial staff within their IT organizations. This embedding is crucial for efficiently and effectively rolling data up to a central finance department (FIN) while retaining an understanding of complex technical subjects. Below are some reasons our clients choose to retain financial functions within their IT organization:
- Retention of Subject Matter Experts (SMEs): IT staff who specialize in finance possess valuable expertise in both technology and financial processes. These individuals have acquired deep knowledge of the organization’s technology requirements, IT finance, and business requirements. When embedded staff are moved outside of IT to Finance, they rapidly lose key skills (particularly understanding the technologies) and connection to IT projects, which then necessitates additional work or staffing by IT BRMs to address the new gap. This loses any theoretical efficiencies or cost savings. By keeping specialized finance staff embedded in IT, the organization ensures the retention of critical knowledge and experience, promoting efficient collaboration and problem-solving.
- Efficient Translation of IT Concepts: Translating complex IT concepts to finance professionals can be a time-consuming process. Relocating embedded finance IT staff to a central FIN department risks introducing communication gaps that impedes understanding and hinders decision-making. Keeping embedded IT finance staff ensures more seamless communication and collaboration, enabling efficient interpretation of technical jargon and facilitating effective alignment between IT and finance.
- Cloud Technology Integration: The shift towards cloud computing represents a significant transformation for organizations, particularly in terms of financial management. The cloud introduces new financial considerations, such as subscription-based models, pay-as-you-go structures, and cost optimization strategies. It is crucial for finance professionals to have a strong understanding of IT and cloud technologies to effectively manage and optimize financial resources. By retaining finance staff within IT, the organization ensures that financial expertise is readily available to navigate the complexities of cloud adoption and effectively manage the associated financial implications.
- Mitigation of Inefficiencies: Centralizing the finance function may introduce inefficiencies in the IT organization. With finance staff separated from IT, decision-making processes, financial planning, and budget allocation may become disjointed and convoluted. By keeping finance staff embedded within IT, the organization fosters a cohesive and streamlined approach to financial management, ensuring alignment between business goals, technology investments, and financial strategies.
Based on IDC experience with large complex client IT organizations, a majority of them retain dedicated technology-finance staff within their IT organizations. This is a recognition that organizations need to preserve critical subject matter expertise that enables efficient translation of IT concepts, facilitates the integration of cloud technologies, and mitigates potential inefficiencies. This approach promotes effective collaboration, informed decision-making, and optimized financial management within the IT organization.
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